PHOENIX — This year, inflation has made it difficult for many to afford to invest. But even when money is tight, there are still ways to build wealth over time.
The best place to build long-term wealth is in a diversified portfolio of stocks, like the S&P 500, according to Bankrate's James Royal.
Royal said the S&P 500 has a strong track record for building wealth. It's time-tested and proven positive for individual investors.
There are always risks when investing in stocks, but investing in the S&P 500 index fund is a lower risk than individual securities. He said the S&P 500 has increased consistently as the American economy grows and develops. He added it's also a great way to capture inflation and make it work for our bank accounts.
“All that inflation that you’re seeing in the economy, America’s best companies are capturing that and they’re able to raise their prices and therefor their profits," Royal said. "So you get to participate in that inflation on the side of the house. You’re not just paying that inflation, those companies are boosting their prices and boosting their profits and their stocks go up.”
Building wealth over time is the best and safest plan, according to financial planners. It not only reduces risk but maintains a savings discipline. Some of the best investments of 2024, according to Bankrate, are high-yield savings accounts, long-term CDs, corporate bond funds, dividend stock funds and value stock funds.
High-yield savings accounts are low-risk products. It’s important to note If the Federal Reserve lowers interest rates, yields will come down from the account, Royal said. So remember the rate is variable and if the interest rate slows, so does your savings growth. If wanting to lock in higher interest rates for a longer period, opt for something else like a CD.
Other top ways to save in 2024 are small-cap stock funds or stocks of relatively small companies, a real estate investment trust and even rental housing, if able to manage your own properties.
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